ECB UPDATE1: Policymakers Cite 'Concerns' of Euro Overshoot

--Adds Details and Context

By Jack Duffy

     PARIS (MNI) - European Central Bank policymakers expressed "concerns" about

a possible over appreciation of the euro in their most recent policy meeting on

July 20.

     According to the accounts of the meeting, released Thursday, policymakers

"remarked that the appreciation of the euro to date could be seen in part as

reflecting changes in relative fundamentals in the euro area vis-a-vis the rest

of the world."

     But "concerns were expressed about the risk of the exchange rate

overshooting in the future," according to the minutes. 

     The euro fell back below the $1.17 level after the accounts were released,

dropping to around $1.1675. 

     Policymakers also expected upcoming headline inflation to be "slightly

lower than previously expected, mainly owing to recent developments in oil

prices and exchange rates," according to the accounts.

     The ECB Governing Council will meet again on Sep 7 to receive new staff

forecasts on growth and inflation and to begin a discussion of tapering the

central bank's E2.3 trillion quantitative easing program.

     Analysts have speculated that because of the stronger euro, a detailed

tapering announcement could be delayed until the following policy meeting on Oct

25. 

     The euro touched a high of around $1.19 earlier this month, putting it up

by about 13% on year before its recent decline. 

     More

--MNI Paris Bureau; tel: +33 1-42-71-55-41; email: jack.duffy@marketnews.com

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

[TOPICS: M$X$$$,M$$EC$]